A New Way to Coordinate Work

This is the second article about blockchain and focuses on smart contract and Decentralized Autonomous Organization (DAO). “Smart contracts digitize agreements by turning the terms of the agreement into computer code that automatically executes when the contract terms are met.”- Ethereum. org

If you follow popular press, you have heard about the great resignation or quitting. I have thought a lot about it, as someone who decided to leave a corporate job months before it was fashionable to do so. My conclusion is that we need fundamental change in how work is organized (I will keep myself limited to knowledge work because that’s what I understand) in most work places. DSAO or Decentralized Semi Automated Organization may be the answer.

This is a way to organize workers vs. just organizing work. When we hear automated work, we envision few employees operating robotic assembly line or a software that automatically makes a decision. In all these cases the work has been automated but the workers are still organized under the structure of early 20th century industrial organization.

In this paper, Ronald Coase, a Nobel prize winning economist, argued that an organization (“firm” per Coase) exists as a specialized exchange economy, whose main purpose is to enforce contracts. As an employer it does not need to manage individual contracts with each expert contributing to its business (aka employee). So having an organizational structure with employees frees up the firm to focus its effort to enforce contracts on transactions with outside constituents like customer, supplier, contractor. Per this definition, organizations with workers seem uniquely suitable for smart contracts.

In my experience, work inside an organization is organized under an umbrella of “informal” contracts like

Defined roles for each worker
Pyramid shaped organization structure
Organizational policies
Departments or silos

to name a few.

It is not unusual to see the same role being executed differently by different employees in the same organization. According to Coase, vagueness in contract terms is the difference between an employee and a contract worker. “The details of what the supplier is expected to do is not stated in the contract but is decided later by the purchaser,” where purchaser and supplier are employer and employee respectively.

Hierarchical power structure is another informal contract where majority of the authority and responsibility are informal or “norm” based. Organizational policies, e.g., hiring, compensation, diversity policies are broad and lack enforceability. It is a rare organization where every individual knows exactly what he/ she is responsible for, which work belongs to which group or department and everyone agrees with it.

What if we could design an organization based on the principles of transparency, distributed authority, project-based roles and group structure that evolve with each project? This is what DSAO could do. I have intentionally not called it DAO because I do not believe that every interaction rule among human beings can be written in code. Though blockchain is touted as “trustless”, which is fine for “transaction” but insufficient for “collaboration”. True collaboration requires mutual trust and belief in something beyond each individual task and corresponding monetary value. I see DSAO to be a middle ground, a way to learn and grow from, an infinitely better way to organize than traditional org. structure.

In its simplest form, work requirement and the value of the work will be written in a smart contract. This is Upwork but within an organization. A start up can have a pre-selected list of collaborators (Gumroad model or employees) who have been vetted as true believer in the mission of the DSAO. A smart contract works easily for objective task like fixing a bug in a code but lot harder for tasks like UX design or financial analysis which are often subjective, assumption based and people have varying opinion. However, in the later cases, a group consensus-based contract execution can be established where a majority of the stakeholders agree. This is still fundamentally different than committee-based decision making in large organizations where voting against the highest-ranking member in the committee is often considered a deal breaker and can have serious consequences for the voter.

In DSAO, no role is attached to a person. Instead, roles are attached to task or project. For example, the product concept needs a revenue projection (a finance role), needs front end interface (a UX designer/ product owner/ front end engineer roles). People who can pitch in sign up for the task, finish their portion and get paid as soon as the work is accepted. This structure has few benefits:

provides significantly better autonomy, flexibility, role clarity and transparency for the worker
everyone can see the rates for tasks, reducing partiality
those who want, can continue to grow and learn by choosing to work on a variety of projects that interest them
though approval or acceptance of work products are still needed it can be accomplished by a group of stakeholders vs. a “manager” who may or may not understand the complexity and skill set for specific tasks.

Does this mean every employee gets to decide when and what to work on? Of course not. Organizations cannot function without expectation of deadline and delivery quality. However, a smart contract type arrangement where tasks are clearly “coded” for its expectation and value, would be transformational for worker empowerment and transparency. It will be also telling if a task with management-imposed deadline has no taker simply because no worker thinks it can be accomplished within the time period.

This model of work product delivery --> inspection by stakeholders --> acceptance / rejection by stakeholders --> rework if needed --> final delivery --> immediate payment to worker model is a far more transparent, democratic process while making room for work that requires iteration and some subjectivity. DAO in its strictest form cannot account for human error (because it is immutable), work tasks that requires judgement and subjectivity. A hybrid DSAO model that allows for course correction, inclusion of all types of organizational activities including non-coding activities like marketing, design while providing the benefits of a decentralized, transparent, flat structure and self-directed workflows will be exceedingly attractive to many.

DSAO takes the spirit of the DAO but does not limit activities to what can be coded in smart contract. At its heart DSAO is a way to organize work across self-directed, autonomous specialists, which is the definition of a knowledge worker.